Right off the bat, you'll have to know that it's not an insignificant investment getting an AMS operation up and running.

Unlike the traditional route to professional services in which you can sell ahead and then hire to the opportunities, in application managed services you'll have to start with a much higher fixed cost. The service has to be in place at the point-of-sale, because once you sell it, it'll be too late to build the infrastructure. In our experience, the cost of this investment is in the neighborhood of 2.5% of your revenue to model this program over a 6-month period. It's another 5% of revenue to staff the program and roll it out the first year. It'll take 6 months of planning and 1 year of implementation to get the business unit rolling and profitable. That's the hard news.

The easier news to swallow is that once you get this up and running, you can reasonably expect a 1 year ROI once the unit is profitable, after which you can realize gross margin contributions for your AMS offerings to be about 15% higher than your core offerings, which is why the attraction is there.

We have a pretty good handle on the mechanics of building an AMS offering, and a thorough grasp of the issues with which you'll have to contend. Oddly, for us, that's the easy part. Where we find ourselves working the hardest is acting as an AMS lightning rod, getting executives to catch this trend at this early stage. We see too many executives seduced by the short-term appeal of low-hanging fruit who have not yet committed themselves to giving AMS the priority it deserves.

There are, however, companies like Pariveda Solutions that see the potential, and who are applying the resources to get a head start on what they envision will be a major revenue generator for them.